Scenario 16-2

question 258

Multiple Choice

Scenario 16-2. The following facts apply to a small, imaginary economy.
• Consumption spending is $5,200 when income is $8,000.
• Consumption spending is $5,536 when income is $8,400.
-Refer to Scenario 16-2. In response to which of the following events could aggregate demand increase by $1,500?

• A) A stock-market boom increases households' wealth by $300, and there is an operative crowding-out effect.
• B) A stock-market boom increases households' wealth by $275, and there is an operative crowding-out effect.
• C) An economic boom overseas increases the demand for U.S. net exports by $240, and there is no crowding-out effect.
• D) Aggregate demand could increase by $1,500 in response to any of these events.

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Definitions:

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an orderly transaction between market participants.

Book Value

Book value is the value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus any depreciation, amortization, or impairment costs.

Loss on Disposal

An expense recorded when an asset is sold for less than its carrying amount on the balance sheet.

Cash Proceeds

The actual amount of money received from transactions such as sales, financing, or the sale of assets.